Tax Litigation

RELATED PRACTICE AREA(S)

Although most tax disputes are resolved by agreement or administrative settlement, sometimes the only way to vindicate your position is to go to court. Whether your case is yet to be filed or ripe for appeal, Caplin & Drysdale litigators can translate the firm's substantive knowledge and courtroom experience into a winning litigation strategy. Consult us when you need representation.

Areas of Practice

Litigating a Tax Controversy

Winning on Appeal

Litigating a Tax Controversy

Sometimes you cannot avoid litigating a tax controversy with the Internal Revenue Service or with a state tax authority. The dollar value of the issue may be too large for the taxpayer to settle, there may be irresolvable disputes about the facts, or the parties may simply have different views of what the applicable law means.

Caplin & Drysdale's tax litigators can help you get the results you need. Our tax litigators have extensive experience in tax law, tax procedure, and winning tax cases. We have more than 30 years experience litigating all types of tax controversies, from individual tax liability and collection disputes to the largest, most complex corporate deficiency and refund litigation. We have represented taxpayers in the U.S. Tax Court, the Court of Federal Claims, and Federal district courts nationwide. We have handled appeals to all of the Federal courts of appeal and to the U.S. Supreme Court.

Always sensitive to the cost of litigation, we endeavor to work with our client to identify the issues that are likely to be critical to the litigation. We focus our efforts on those key issues, often beginning while the audit is still underway, so that we are in a position to push for the most favorable pre-trial settlement or to present the strongest case at trial. When a Caplin & Drysdale litigator takes your tax controversy to court, the judge and the opposing party will be presented with the facts and the law in the most persuasive light.

Representative Engagements

The IRS claimed that mailing list rental income received by two tax exempt charities, Common Cause and Planned Parenthood Federation of America, was taxable as unrelated business income.

Result: Caplin & Drysdale represented both organizations from the filing of their Tax Court petitions, through discovery and negotiations with the government, to a complete victory in the Tax Court. The IRS chose not to appeal the Tax Court's decisions and ultimately abandoned its position that mailing list income is taxable as unrelated business income.

Two unrelated companies that were parties to a complex corporate disposition filed income tax returns claiming the same $250 million tax loss. The IRS proposed to recast the disposition as a stock redemption and disallowed the loss to both companies.

Result: We filed a Tax Court petition on behalf of one of the companies and moved to consolidate our client's case with that of the other company. The Tax Court entered summary judgment against the IRS in the consolidated proceeding, and we were then able to negotiate a three-way settlement.

A legal publisher sued the IRS under the Freedom of Information Act to obtain Advance Pricing Agreements (APAs) and related return information, and the IRS agreed to produce them notwithstanding the confidentiality concerns of the taxpayers that participated in the APA program.

Result: After the IRS' concession, we filed an amicus curiae brief on behalf of several taxpayers who had obtained APAs, arguing that the IRS' position was erroneous and would result in an unauthorized disclosure of our clients' confidential information. Our intervention forced the court to consider the legal issues, which helped provide adequate time for Congress to debate on the policy issues. Congress enacted an amendment to the Internal Revenue Code vindicating our clients' position that APAs and all related tax return information are confidential.

Two separate multinational corporations recently came to Caplin & Drysdale for advice on how to recover millions of dollars of interest on overpayments when the statute of limitations was about to expire.

Result: Caplin & Drysdale filed refund claims and civil actions in the U.S. Court of Federal Claims, helped negotiate the claims with the IRS and Justice Department, and ultimately settled the interest computation issues. As a result, each company recovered millions of dollars.

Our Services

We can guide you through the audit and litigation process with strategic advice and effective legal representation at all of the following stages:

Dealing with IRS Examiners

Responding to information requests or summonses

Requesting technical advice from the IRS National Office

Negotiating closing agreements and other settlements

Preparing protests and negotiating settlements in the IRS Appeals Office

Choosing the proper forum and strategy for tax litigation

Conducting discovery

Litigating your case at trial and on appeal

Winning on Appeal

With the tax law as complicated as it is, there are times when the trial court reaches the wrong conclusion. A taxpayer may be unable to convince a trial judge or a jury of the merit of its position, or the IRS may refuse to accept a taxpayer victory and seek reversal on appeal. The appellate courts are thus increasingly confronted with complex tax issues, often involving massive records from the court below and seemingly impenetrable statutes, regulations, and case law.

There is an art to cutting through the complexity in a tax case and guiding an appellate court to the right legal answer for clients. Caplin & Drysdale's appellate tax litigators are masters of this art. Our appellate lawyers have argued dozens of tax appeals nationwide, up to and including the U.S. Supreme Court. Our firm has the depth of tax experience to reduce any difficult tax issue to its essentials and to analyze it from all sides -- historical, legal, factual, and the underlying policies. We then are able to craft a persuasive and creative brief that greatly increases our clients' chances of prevailing before the courts of appeals.

Representative Engagements

The IRS denied a Research & Experimentation tax credit claimed by a major aerospace company, contending that the research had been "funded" by the Federal Government under a fixed price contract. The trial court upheld the IRS disallowance of the credit.

Result: Caplin & Drysdale handled the appeal to the Federal Circuit and won a unanimous reversal, convincing the appellate court that the trial judge had misapplied the governing Treasury Regulations. On remand, the case was settled on terms very favorable to the taxpayer.

The IRS asserted a multi-million dollar deficiency in windfall profit tax against a major oil company. The Tax Court sustained the IRS position.

Result: Caplin & Drysdale worked with a team of law firms to craft a winning strategy for appeal to the Fifth Circuit. The client selected a Caplin & Drysdale lawyer to argue the case, and the result was a unanimous decision in the taxpayer's favor. The case was remanded on a factual issue and settled on terms resulting in a 100% victory for the taxpayer.

Our Services

Filing notice of appeal and preparing the required appendix on appeal

Preparing briefs and reply briefs to court of appeals

Working with government counsel to investigate settlement possibilities